Google-Yahoo ad deal in holding pattern

Yahoo Inc. and Google Inc. have agreed to delay the start of a advertising partnership to give the Justice Department time to finish investigating the proposed deal.

The decision marks an abrupt turnaround for Google CEO Eric Schmidt, who had recently said he planned to start supplying ads to Yahoo’s search engine sometime in early October, even if federal regulators had yet to give their approval.

“Time is money in our business,” he said.

Now, the two companies are in a holding pattern, raising more questions about whether the government plans to fight the No. 1 and No. 2 search engines from cooperating. Last month, the Justice Department hired a private attorney to examine the partnership.

In a statement, Google said: “When we announced our advertising agreement with Yahoo in June we agreed to delay its implementation until October to give regulators time to look at the details. As we are still in conversation with the Department of Justice we have agreed to a brief delay in implementing the agreement while those discussions continue.”

Yahoo said much of the same thing, adding “we have had discussions with regulators and look forward to responding to their questions about this agreement.”

The deal faces stiff opposition from a number of major advertisers and ad agencies, which fear that it will lead to higher prices for online advertising. Google and Yahoo have vigorously defended the partnership, saying that it will have no impact on prices and that it is structured in a way to avoid anti-trust concerns.